U.S. Senate reintroduces permanent R&D tax credit

WASHINGTON  One of the U.S. electronics industry's most cherished legislative goals, a permanent extension of the research and development tax credit, was swiftly reintroduced in Congress on Monday (Jan. 22).

President George W. Bush has said he supports a permanent extension of the credit that currently must be renewed on an annual basis.

Congress voted last year to extend the R&D tax credit for five years. Industry groups at the time called that action a "down payment on permanent extension."

The reintroduced Senate legislation also would amend the U.S. tax code to increase the rates for alternative incremental research credits collected by industry.

Industry backers stress that large U.S. high-tech companies like Microsoft Corp. and Intel Corp. spend as much as 20 percent of their annual revenues on research and development. "R&D cannot be conducted by stopwatch," said William Archey, president of the AeA, an electronics industry trade association. "To generate maximum long-term economic benefits, the R&D process must be uninterrupted and seamless. And so should be the tax credit designed to support it."

For each tax cut granted by Congress, however, lawmakers must find alternative sources of revenue to cover spending on government programs. But with much of the 107th Congress in a tax-cutting mood, the measure is given a good chance of passage this year, observers said.